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What GAO Found

Although the estimated F-35 Joint Strike Fighter (F-35) program acquisition costs have decreased since 2014, the program continues to face significant affordability challenges. The Department of Defense (DOD) plans to begin increasing production and expects to spend more than $14 billion annually for nearly a decade on procurement of F-35 aircraft. Currently, the program has around 20 percent of development testing remaining, including complex mission systems software testing, which will be challenging. At the same time, the contractors that build the F-35 airframes and engines continue to report improved manufacturing efficiency and supply chain performance.

DOD plans to manage F-35 modernization as part of the existing program baseline and is exploring the use of a single contract to procure multiple lots of future aircraft. Both courses of action have oversight implications. DOD has begun planning and funding significant new development work to add to the F-35's capabilities. Known as Block 4, the funding needed for this effort is projected to be nearly $3 billion over the next 6 years (see figure below), which would qualify it as a major defense acquisition program in its own right.

DOD does not currently plan to manage Block 4 as a separate program with its own acquisition program baseline but rather as part of the existing baseline. As a result, Block 4 will not be subject to key statutory and regulatory oversight requirements, such as providing Congress with regular, formal reports on program cost and schedule performance. A similar approach was initially followed on the F-22 Raptor modernization program, making it difficult to separate the performance and cost of the modernization from the baseline program. Best practices recommend an incremental approach in which new development efforts are structured and managed as separate acquisition programs with their own requirements and acquisition program baselines. The F-22 eventually adopted this approach. If the Block 4 effort is not established as a separate acquisition program, transparency will be limited. Therefore, it will be difficult for Congress to hold it accountable for achieving its cost, schedule, and performance requirements.

Why GAO Did This Study

With estimated acquisition costs of nearly $400 billion, the F-35 Joint Strike Fighter—also known as the Lightning II —aircraft is DOD's most costly and ambitious acquisition program. Since 2001, GAO has reported extensively on the F-35 program's cost, schedule, and performance problems. The program plans to begin increasing production rates over the next few years.

The National Defense Authorization Act for Fiscal Year 2015 contains a provision for GAO to review the F-35 acquisition program. This report assesses program (1) affordability, remaining development, and ongoing manufacturing, and (2) future modernization and procurement plans.

GAO analyzed total program funding requirements. GAO analyzed program documentation including management reports, test data and results, and internal DOD program analyses. GAO also collected and analyzed production and supply chain performance data, and interviewed DOD, program, and contractor officials.

What GAO Recommends

Congress should consider directing DOD to manage F-35 follow-on modernization, Block 4, as a separate and distinct acquisition program with its own baseline and regular cost, schedule and performance reporting. GAO included this matter for consideration because DOD did not concur with GAO's recommendation to manage Block 4 as a separate acquisition program. GAO continues to believe this recommendation is valid as discussed in this report.

For more information, contact Michael J. Sullivan at (202) 512-4841 or sullivanm@gao.gov.

Matter for Congressional Consideration

Status: Closed - Implemented

Comments: Congress passed the National Defense Authorization Act for Fiscal Year 2017 which mandated that the Secretary of Defense may not award any follow-on modernization development contracts for the F-35 until the Secretary has submitted a report that contains the basic elements of an acquisition program baseline for Block 4 modernization. According to the Act, this report should include elements such as cost estimates, schedule estimates, technical performance parameters and technology readiness levels that are typical of an acquisition program baseline. The Secretary is also required to update this report annually for the congressional defense committees.

Matter: To enhance program oversight and accountability given that DOD does not plan to modify its acquisition strategy and hold a Milestone B decision review for the F-35 follow-on modernization program, Congress should consider directing the Secretary of Defense to hold a Milestone B review and manage F-35 Block 4 as its own separate and distinct major defense acquisition program with its own acquisition baseline and regular cost, schedule, and performance report to Congress.

Recommendation for Executive Action

Status: Open

Comments: DOD did not concur with our recommendation to hold a Milestone B review and manage F-35 Block 4 follow-on modernization as a separate and distinct major defense acquisition program. Following issuance of our report, Congress passed the National Defense Authorization Act for Fiscal Year 2017 which mandated that the Secretary of Defense may not award any follow-on modernization development contracts for the F-35 until the Secretary has submitted a report that contains the basic elements of an acquisition program baseline for Block 4 modernization including cost and schedule estimates and technology readiness information, among other things. In January 2018, DOD released their F-35 modernization plan in response to this congressional mandate. DOD noted in this report that it plans to develop the full acquisition program baseline for F-35 Block 4 over the next year and provide a complete report to Congress by March 2019. In April 2019, we reported in GAO-19-341 that F-35 Block 4 business case documents were not completed because program officials took a step back to re-examine their approach. We are leaving this recommendation open because GAO is currently conducting a review of DOD's follow-on modernization plan.

Recommendation: In order to ensure that proper statutory and regulatory oversight mechanisms are in place and to increase transparency into a major new investment in the F-35 program, the Secretary of Defense should hold a Milestone B review and manage F-35 Block 4 as a separate and distinct Major Defense Acquisition Program with its own acquisition program baseline and regular cost, schedule, and performance reports to the Congress.